2.2.1 Sales forecasting

Question 1

define consumer income

Answer 1

the amount of income remaining after taxes and expenses have been deduced from wages

Question 2

define consumer trends

Answer 2

the habits or behaviours of consumers that determine the goods and services they buy

Question 3

define economic growth

Answer 3

the rise in output of an economy as measured by the growth in gross domestic product usually as a percentage.

Question 4

define economic variables

Answer 4

measures within the economy which have affects on business and consumers
e.g. unemployment, inflation

Question 5

define extrapolation

Answer 5

forecasting the future trends based on past data

Question 6

define forecasting

Answer 6

a business process, assessing the probable outcome using assumptions about the future

Question 7

define sales forecasts

Answer 7

projection of future sales revenue, often based on previous sales data

Question 8

define time series data

Answer 8

a method which allows a business to predict future levels from past figures

Question 9

what is the purpose of sales forecasts?

Answer 9

start promotional activities, avoid cash flow problems, improve productivity capacity and employ

Question 10

describe a sales forecast

Answer 10

SF estimates the volume or value of future sales using market research or past sales data
-helps avoid cash flow problems, manage production, staff and financing needs more effectively
-frees up management time

Question 11

explain what is meant by a time series analysis?

Answer 11

predicts future levels from past data, set of figures arranged in order of the time they occurred.
only describes what is happening
four components:
-trend (a pattern indicated by the figures)
-seasonal fluctuations
-cyclical fluctuations
-random fluctuations

Question 12

what are some benefits of sales forecasts?

Answer 12

provides a clear plan ahead which helps:
-inform cash flow forecasts & give the business a clear idea of the cash inflows
-allows the business to plan orders of supplies and components
-enable business to ensure it has the correct staffing level and has the capacity to meet the projected orders

Question 13

what are some of the factors which affect sales forecasts?

Answer 13

Action of competitors
Economic Variables -> interest rates, inflation, unemployment
Consumer trends -> habits and behaviours of consumers around products they use e.g. fashion trends, sustainability

Question 14

what are some difficulties of sales forecasts?

Answer 14

no guarantees - a sales forecast may not be accurate as actual sales can be less or more than expected
dynamic market - always changing
short term thinking - useful for a business which can produce and sell products in one year period
-use of extrapolation -> not accurate enough to based future predictions off of.